Correlation Between IShares Nikkei and VanEck Crypto

Can any of the company-specific risk be diversified away by investing in both IShares Nikkei and VanEck Crypto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Nikkei and VanEck Crypto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Nikkei 225 and VanEck Crypto and, you can compare the effects of market volatilities on IShares Nikkei and VanEck Crypto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Nikkei with a short position of VanEck Crypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nikkei and VanEck Crypto.

Diversification Opportunities for IShares Nikkei and VanEck Crypto

0.24

Correlation Coefficient

IShares Nikkei  VanEck Crypto

Modest diversification

The 3 months correlation between IShares and VanEck is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nikkei 225 and VanEck Crypto and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Crypto and IShares Nikkei is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Nikkei 225 are associated (or correlated) with VanEck Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Crypto has no effect on the direction of IShares Nikkei i.e., IShares Nikkei and VanEck Crypto go up and down completely randomly.

Pair Corralation between IShares Nikkei and VanEck Crypto

Assuming the 90 days trading horizon iShares Nikkei 225 is expected to generate 0.28 times more return on investment than VanEck Crypto. However, iShares Nikkei 225 is 3.63 times less risky than VanEck Crypto. It trades about 0.12 of its potential returns per unit of risk. VanEck Crypto and is currently generating about -0.12 per unit of risk. If you would invest  2,334  in iShares Nikkei 225 on September 22, 2024 and sell it today you would earn a total of  66.00  from holding iShares Nikkei 225 or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Nikkei 225  vs.  VanEck Crypto and

iShares Nikkei 225

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Nikkei 225 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares Nikkei is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Crypto

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days VanEck Crypto and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, VanEck Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Nikkei and VanEck Crypto

The main advantage of trading using opposite IShares Nikkei and VanEck Crypto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Nikkei position performs unexpectedly, VanEck Crypto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in VanEck Crypto will offset losses from the drop in VanEck Crypto's long position.

The idea behind iShares Nikkei 225 and VanEck Crypto and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.